Outlook for consumer-powered American economic surge is clouded by government shutdown

Outlook for consumer-powered American economic surge is clouded by government shutdown

10:38 18.01.2019

After tax trims, soaring incomes as well as buoyant stock markets provoked a consumer boom the previous year, signs are showing up that the key engine of American economic surge could cool down, and a record-long government shutdown also contributes to worries.

Federal Reserve representatives along with numerous market experts have long counted on ongoing firm consumer spending to keep the American economy struggling along, notwithstanding headwinds from trade clashes, recent financial markets turbulence as well as weakening global surge.

Now they are afraid that the consumer boom could reverse soon.

The warning signs had the income spectrum spun - from the wealthy probably cutting back after their shares got squeezed last fall, to the most vulnerable folks getting squeezed in case a lingering government shutdown postpones food assistance payments.

Market experts aren’t assured whether the previous year's personal income tax cut will result in higher refunds and spur big-ticket purchases, including home appliances, or whether the windfall was spent in 2018 when paycheck withholding went down.

The shutdown has been already lasting for up to 28 days. It could potentially postpone refunds and affect companies, which rely on consumers shelling out money on their services and goods.

Additionally, a delay in refunds could affect home improvement chains, including Lowe's Cos Inc, Wayfair Inc, and Home Depot that see early spring projects and furniture purchases spur sales.

The government shutdown clouds the outlook for spending, retailers as well as the US economy at large due to the fact policymakers and executives weigh not the direct impact of 800,000 federal staff members ending up without pay, but also how much it can potentially affect business and consumer confidence.

The previous week Charles Evans, Chicago Federal Reserve President told that while the immediate effect of the shutdown on the American $20.7-trillion economy would be minor, the psychological impact could be enormous.

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